Seyfettin Gürsel and Tuba Toru Delibaşı
The new airport of Istanbul is planned to be one of the largest in the world with 150 million passenger capacity. The Cengiz-Kolin-Limak-Mapa-Kalyon Consortium, a joint venture of Turkish companies, has won the tender for the new airport, promising to pay 22 billion 152 million Euros (without VAT) to the Turkish Treasury for 25 years starting 2019 ending 2043.The new airport, replacing the current Ataturk Airport in 2019, is planned to be built in three phases. In the first phase, the new airport is projected to accommodate 90 million passenger. Then, there are plans to increase the capacity of the new airport to 120 million in the second phase and then to 150 million in third phase. This big project in terms of capacity and tender price has raised a heated debate on the environmental concerns and profitability. In this report, we focus on the financial part of the problem and provide an analysis on the expected number of passengers and the profitability of business.
To do so, we regress the number of passengers on real GDP per capita, population and real ticket prices, and then forecast the number of enplaned passengers under two scenarios, which differ in terms of real GDP growth, for the period 2013-2043. In the first one, we set growth at 5 percent for the next seven years, which is the admitted potential growth rate for the Turkish economy, then 4 percent until 2030, and, finally, 2 percent up until 2043. In the second scenario, should Turkey be unable to implement the necessary reforms in order to secure its potential economic growth, the growth rates used in the forecasts are 4 percent, 3 percent and 1.5 percent, respectively. After obtaining the number of passengers, we predict the aeronautical and non-aeronautical (commercial) revenues depending on passenger forecasts.
We find out that if the Turkish economy grows around its potential in the next 25 years, the expected capacities do not seem unrealistic. But if growth rates stay below the potential level, the airport may only reach the capacity of 120 million passengers by the 2050s. Therefore, the estimated operating profits will be far from compensating the loan repayments and the rent to be paid to the Treasury if the Turkish economy fails to achieve its potential growth. The profitability issue is linked to the number of passengers, given the service prices announced by the Republic of Turkey General Directorate Of State Airports Authority. Taking as benchmarks the financial information of Hartsfield-Jackson Atlanta International Airport, the busiest in the US with about 95 million passengers, as well as those of the Ataturk and Sabiha Gokcen airports, we find that in the first scenario, cumulative losses appear until 2030 because of rent and loan installments. But these losses are largely compensated for later thanks to large profits. Nevertheless, in the second scenario, the profitability of the mega airport might be very problematic unless the consortium succeeds in raising enough non-operational revenue.
Concerning the land devoted to this business, around 3,500 hectares of land appears to be enough to meet the planned airport’s passenger capacity by a basic comparison with Atlanta and Ataturk. The Atlanta Airport, which has now the biggest passenger capacity of the world, 95 million passengers, is built on 1,900 hectares and the Ataturk Airport is built on 1178 hectares while the new airport of Istanbul will be built on around 7,500 hectares. There may be other business opportunities in the extensive area provided to the new airport to raise revenues.
doc. ResearchBrief150
pdf. ResearchBrief150